Investor Presentation May 2017

Transcription

1 Investor Presentation May 2017

2 Safe Harbor Statement This document may contain certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of Such statements may be identified by words such as anticipate, believe, estimate, expect, intend, predict, hope, should, plan, will or similar expressions. Any statements contained herein that are not statements of historical fact may be deemed forward-looking statements. These statements are based on management's current expectations and accordingly are subject to uncertainty and changes in circumstances. Actual results may vary materially from the expectations contained herein due to various important factors, including (but not limited to): consumer preferences, spending and debt levels; the general economic and credit environment; interest rates; seasonal variations in consumer purchasing activities; the ability to achieve the most effective product category mixes to maximize sales and margin objectives; competitive pressures on sales; pricing and gross sales margins; the level of cable and satellite distribution for our programming and the associated fees or estimated cost savings from contract renegotiations; our ability to establish and maintain acceptable commercial terms with third-party vendors and other third parties, with whom we have contractual relationships, and to successfully manage key vendor relationships and develop key partnerships and proprietary and exclusive brands; our ability to manage our operating expenses successfully and our working capital levels; our ability to remain compliant with our credit facilities covenants; customer acceptance of our branding strategy and our repositioning as a video commerce company; the market demand for television station sales; changes to our management and information systems infrastructure; challenges to our data and information security; changes in governmental or regulatory requirements, including without limitation, regulations of the Federal Communications Commission and Federal Trade Commission, and adverse outcomes from regulatory proceedings; litigation or governmental proceedings affecting our operations; significant public events that are difficult to predict, or other significant television-covering events causing an interruption of television coverage or that directly compete with the viewership of our programming; our ability to obtain and retain key executives and employees; our ability to attract new customers and retain existing customers; changes in shipping costs; our ability to offer new or innovative products and customer acceptance of the same; changes in customer viewing habits of television programming; and the risks identified under Risk Factors in our recently filed Form 10-K and any additional risk factors identified in our periodic reports since the date of such Form 10-K. More detailed information about those factors is set forth in our filings with the Securities and Exchange Commission, including our annual report on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K. You are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date of this announcement. We are under no obligation (and expressly disclaim any such obligation) to update or alter our forward-looking statements whether as a result of new information, future events or otherwise. Adjusted EBITDA EBITDA represents net income (loss) for the respective periods excluding depreciation and amortization expense, interest income (expense) and income taxes. The Company defines Adjusted EBITDA as EBITDA excluding non-operating gains (losses); executive and management transition costs; loss on debt extinguishment; distribution facility consolidation and technology upgrade costs and non-cash share-based compensation expense. The Company has included the term Adjusted EBITDA in our EBITDA reconciliation in order to adequately assess the operating performance of our television and online businesses and in order to maintain comparability to our analyst's coverage and financial guidance, when given. Management believes that the term Adjusted EBITDA allows investors to make a meaningful comparison between our business operating results over different periods of time with those of other similar companies. In addition, management uses Adjusted EBITDA as a metric to evaluate operating performance under the Company s management and executive incentive compensation programs. Adjusted EBITDA should not be construed as an alternative to operating income (loss), net income (loss) or to cash flows from operating activities as determined in accordance with generally accepted accounting principles ( GAAP ) and should not be construed as a measure of liquidity. Adjusted EBITDA may not be comparable to similarly entitled measures reported by other companies. The Company has included a reconciliation of the comparable GAAP measure, net income (loss) to Adjusted EBITDA in this presentation. Certain data in this presentation is unaudited. 2

3 Company Overview Company: Evine Live, Inc. Headquarters: Eden Prairie, MN Distribution Center: Bowling Green, KY Employees: ~1,300 Exchange / Ticker: NASDAQ.GS / EVLV Market Cap (5/18/17): $70.7 million 2016 Revenue: $666.2 million 2016 Adj. EBITDA: $16.2 million We are a multi-platform video commerce company that offers a mix of proprietary, exclusive, and name brands directly to consumers in an engaging and informative shopping experience via television, online, and mobile. We reach more than 87 million cable and satellite television homes with entertaining content in a comprehensive digital shopping experience 24 hours a day. Our advisory team is led by fashion and entertainment industry icons Tommy Hilfiger, Tommy Mottola, and Morris Goldfarb. Our new leadership team is executing its strategic plan designed to build shareholder value. 3

4 Why Invest Today? We believe our stock price is undervalued we currently trade at 0.2x EV/Revenue. Our closest competitor trades at 0.6x EV/Revenue, this gap represents a $287 million or $4.42/share opportunity. We are growing our collection of brands using our strong merchant team and our advisor group (Tommy Hilfiger, Tommy Mottola, Morris Goldfarb). Our national multi-platform distribution provides us significant reach in today s retail landscape which helps us leverage our interactive video commerce expertise. We ve made significant investments in our fulfillment center and WMS system in FY15-16 seeing the financial benefit in FY17 and beyond. We will convert to HD in fall 2017 we expect revenue lift from this initiative. It is clear the traditional department store retail strategy of offering everything to everyone has been disrupted by technology, which allows for narrowcasting of personal shopping capabilities to consumers. We believe our growth strategy positions us to become the platform for the next generation of personalized ecommerce. 4

5 We Have Made Significant Progress Since our CEO transition in February 2016, we have made significant progress and delivered on our financial performance. FY15 FY16 1Q17 and Future Strengthen Balance Sheet Increased Cash Partial pay down of high interest debt. More to come. Improved Adjusted EBITDA $9.2M $16.2M $18-22M Decreased Comcast Overhang Buy back of 60% or 4.4M shares of Comcast position. Increased overall profitability (EPS) ($0.22) ($0.15) Headed towards breakeven EPS. Drive Revenue Performance with rebalanced merchandise mix 2.8% (3.9%) Back to growth in low-single digits. Large capital investments mostly complete Completed Upgrades to Fulfillment Center On track to complete upgrade to full HD 5

6 Current Growth Plan We believe our growth strategy positions us to become the preferred platform for the next generation of personalized commerce. Build Stable of Proprietary, Exclusive, and Undiscovered Brands Deliver Compelling Live Interactive Content and Commerce Expand the Quality, Quantity, and Technology of our Content Distribution 6

7 Investment Highlights Evine is part of a 3 member oligopoly that generates over $9 billion in annual U.S. revenues* Strategic focus on contribution margin and profit delivery Emerging proprietary and exclusive brands gaining traction and acceptance from customers Established Brands provide stable cash flows and financial performance Improved distribution efficiencies through Bowling Green Facility with new WMS system Utilizing new technologies in mobile and logistics to drive better connectivity between on-air, online, and mobile platforms Significant capital investments complete *$9.3 billion in FY 2016 US revenue for QVCUS, HSN (excluding Cornerstone), and Evine. 7

8 Competitive Landscape Invest In Higher Quality HD Distribution Rollout It s not just how many homes it s also how many channels in each home. Key 2016 Metrics QVC* HSN* Evine Total U.S. Net Revenue $6,120 million $2,475 million $666 million Number of TV households million 91 million 87+ million Revenue per Home $59/HH $27/HH $8/HH Cable Fees and Rate Structure* 5% of TV rev (Est. ~ $2.50/HH) Blended (Est.~ $2.30/HH) Fixed fee (Avg. $1.13HH) HD Presence 2 80 million 55 million 25 million Second Network QVC Plus/ Beauty IQ 94 million HSN 2 48 million Evine Too 8.4 million *Updated as of January Home counts and cable fees are from annual report/investor decks/analyst reports/assumptions 2 HD presence includes cable, satellite and telecom homes per annual reports, investor presentations or SNL Kagan reporting 8

9 Well-Positioned for Dynamic Retail Landscape The Merchant s Ideal Relationship is Directly With The Customer Traditional Media Direct to Consumer is Growing Merchant Traditional Retail Traditional Media is Declining Brick & Mortar Is Transforming Consumer 9

10 Content Distribution Opportunities We will build our Distribution Footprint on the Best Technology of the day 1950s s TV Stations Dominated Video Distribution MSO/Cable Dominated Video Distribution ISPs, On-Demand and OTT Distribution Expected to Dominate Video Distribution in the Future 10

11 Pioneer in Video, Omni-channel Commerce television available in 87+ million homes live broadcast studios branded sets aspirational hosts cross-channel promotional spots digital 50.6% of total company sales integrated home page boutique product video live streaming campaigns online only assortment mobile 48.0% of digital sales integrated home page live streaming iphone & android apps easy interface shop entire assortment social facebook pinterest twitter Instagram youtube blogosphere 11

12 Our Competitive Advantage = Our Brands Jewelry Established proprietary brand portfolio in key jewelry categories of colored gemstones, diamonds, gold, sterling silver, and pearls across a total of 53 on air brands/concepts An elevated ASP in all jewelry categories is a reflection of our commitment to better quality and value for the Evine customer as well as their confidence in our growing luxury jewelry brand portfolio Established reputation from being a longtime jewelry destination in the video commerce world Industry leader with first-to-market gemstone finds, stories, and designs Strategic and creative execution of jewelry events that create strong tune-in both on-air and online 12

13 Our Competitive Advantage = Our Brands Watches Only business in the video commerce arena that has successfully established a core male demographic previously untapped in the industry The strength of our watch business is driven by the core collector recognizing and valuing luxury brands/products The Invicta brand has established a core following that supports its continued performance as one of Evine s largest volume brands Ability (with both jewelry and watches) to take our customers to live remote locations through key events (Las Vegas, Tucson, Cabo, Miami, Bahamas, Mexico, Carnival Cruise) 13

14 Our Competitive Advantage = Our Brands Fashion & Accessories Strong Core - Built to ~80% core proprietary and exclusive brands over 5 years. Strong customer base with high purchase frequency and retention Able to use our brand s voice & unique selling proposition to establish our authority and credibility in the marketplace Fashion Leader - Strongest in video commerce at fast fashion with compelling price/value offers. 14

15 Our Competitive Advantage = Our Brands Beauty + Wellness Strong core and proprietary brands exclusive to Evine Skinn, Consult Beaute, Isomers, Active Argan, Evote, Elizabeth Grant, SIROT Strong national brand presence Beekman 1802, Cover FX, jane iredale, butter LONDON, Michel Germain, Oscar Blandi, Stroke of Beauty Loyal customer base Strong presence of continuity/auto-delivery business drives off-air sales opportunities Home of indie beauty brands Alliance with industry trade show Cosmoprof North America to launch top brands with special segment launched within Evine Beauty Experience 15

16 Our Competitive Advantage = Our Brands Home Strong proprietary brands Innovative kitchen category anchored by celebrity brands like Paula Deen, Todd English, Deadliest Catch & more Strong national brand partnership with Waterford Company s largest customer pool and strong new customer acquisition Largest brand launch category for FY17 16

17 Our Competitive Advantage = Our Brands Consumer Electronics Unique offers from national brands (Samsung, Cobra, etc.) Strong Extended Assortment category Historically biggest category for holidays Higher ASP, which is driven from higher-end product vs. our competitors Committed to branded or themed hours and custom sets as needed for on-air product demonstrations Highly flexible scheduling that allows for opportunistic promotions with key partners 17

18 Financial Summary Net Sales ($ Millions) Gross Profit ($ Millions) $212 $191 $59 $60 $56 $55 $66 $65 $61 $56 $161 $157 $162 $152 $167 $156 F15 Q2 Q2 F15 Q3 Q3 F15 Q4 Q4 Q1 F17 Q1 F15 Q2 Q2 F15 Q3 Q3 F15 Q4 Q4 Q1 F17 Q1 Adjusted EBITDA ($ Millions) EPS (GAAP) $2.5 F15 Q2 $3.8 Q2 $0.2 F15 Q3 $2.5 Q3 $4.9 F15 Q4 $6.4 Q4 $3.4 $3.1 Q1 F17 Q1 $(0.03) $(0.05) F15 Q2 Q2 $(0.09) F15 Q3 $(0.06) Q3 $0.03 $0.01 F15 Q4 Q4 $(0.09) Q1 $(0.05) F17 Q1 18

19 Appendices 19

20 Summary P&L (In thousands, except per share data) F13 FY F14 FY F15 FY Q1 Q2 Q3 Q4 FY F17 Q1 2/1/2014 1/31/2015 1/30/2016 4/30/2016 7/30/ /29/2016 1/28/2017 1/28/2017 4/29/2017 Net Sales $ 640,489 $ 674,618 $ 693,312 $ 166,920 $ 157,139 $ 151,636 $ 190,518 $ 666,213 $ 156,343 Cost of Sales 410, , , ,472 97,311 96, , , ,057 Gross Profit 230, , ,480 61,448 59,828 55,431 64, ,527 56,286 Gross Profit % 35.9% 36.3% 34.4% 36.8% 38.1% 36.6% 34.0% 36.3% 36.0% Operating Expenses: Distribution and selling 191, , ,328 53,425 51,605 49,161 52, ,030 48,730 General and administrative 23,799 23,983 24,520 5,769 5,878 5,690 6,049 23,386 5,995 Depreciation and amortization 12,320 8,445 8,474 2,107 1,977 1,941 2,016 8,041 1,636 Executive & Mgmt transition costs - 5,520 3,549 3, , Activist Shareholder Response Cost 2,133 3, Distribution facility consolidation and technology upgrade costs - - 1, Total operating expense 229, , ,218 64,982 60,002 57,510 61, ,545 56,867 Operating income/(loss) 77 1,003 (8,738) (3,534) (174) (2,079) 3,769 (2,018) (581) Other income (expense): Interest income/(expense) (1,419) (1,562) (2,712) (1,203) (1,604) (1,583) (1,536) (5,926) (1,493) Loss on Debt extinguishment (913) Total other income/(expense) (1,419) (1,562) (2,712) (1,203) (1,604) (1,583) (1,536) (5,926) (2,406) Income tax provision (1,173) (819) (834) (205) (205) (205) (186) (801) (209) Total Net Income/(Loss) $ (2,515) $ (1,378) $ (12,284) $ (4,942) $ (1,983) $ (3,867) $ 2,047 $ (8,745) $ (3,196) EBITDA, as adjusted $ 18,012 $ 22,773 $ 9,206 $ 3,424 $ 3,836 $ 2,529 $ 6,436 $ 16,225 $ 3,050 Weighted average number of common shares outstanding (000's) 49,505 53,459 57,004 57,181 57,259 60,513 64,492 59,785 60,919 Net income/(loss) per common share $ (0.05) $ (0.03) $ (0.22) $ (0.09) $ (0.03) $ (0.06) $ 0.03 $ (0.15) $ (0.05) 20

21 Summary Balance Sheet (In thousands) F13 F14 F15 F17 Q1 Current assets: 02/01/14 01/31/15 01/30/16 01/28/17 04/29/17 Cash & restricted cash and investments $ 31,277 $ 21,928 $ 12,347 $ 33,097 $ 26,388 Accounts receivable, net 107, , ,949 99,062 85,538 Inventories 51,162 61,456 65,840 70,192 75,649 Prepaid expenses and other 6,032 5,284 5,913 5,510 5,784 Total current assets 195, , , , ,359 Property and equipment, net 24,952 42,759 52,629 52,715 53,672 FCC broadcasting license 12,000 12,000 12,000 12,000 12,000 Other assets 896 1,989 1,819 2,204 2,306 $ 233,705 $ 257,691 $ 265,497 $ 274,780 $ 261,337 Current liabilities: Accounts payable $ 77,296 $ 81,457 $ 77,779 $ 65,796 $ 58,211 Accrued liabilities and other 38,620 38,504 37,570 41,185 46,469 Total current liabilities 115, , , , ,680 Capital lease liability Other long term liabilities Deferred tax liability 1,158 1,946 2,734 3,522 3,719 Long term debt 38,000 50,971 70,271 82,146 78,454 Total liabilities 155, , , , ,260 Common stock, preferred stock and warrants 1, Additional paid-in capital 410, , , , ,574 Accumulated deficit (333,504) (334,882) (347,166) (355,911) (359,107) Total shareholders' equity 78,208 84,528 76,979 81,703 74,077 $ 233,705 $ 257,691 $ 265,497 $ 274,780 $ 261,337 21

22 Adjusted EBITDA Reconciliation (In thousands) F13 F14 F15 F17 FY FY FY Q1 Q2 Q3 Q4 FY Q1 Net income (loss) $ (2,515) $ (1,378) $ (12,284) $ (4,942) $ (1,983) $ (3,867) $ 2,047 $ (8,745) $ (3,196) Adjustments: Depreciation and amortization 12,585 8,872 10,327 3,040 3,070 3,093 2,006 11,209 2,604 Interest income (18) (10) (8) (2) (2) (3) (4) (11) (2) Interest expense 1,437 1,572 2,720 1,205 1,606 1,586 1,540 5,937 1,495 Income taxes 1, EBITDA (as defined) 12,662 9,875 1,589 (494) 2,896 1,014 5,775 9,191 1,110 A reconciliation of EBITDA to Adjusted EBIDTA is as follows: EBITDA (as defined) 12,662 9,875 1,589 (494) 2,896 1,014 5,775 9,191 1,110 Less: Executive and management transition costs $ - $ 5,520 $ 3,549 $ 3,601 $ 242 $ 568 $ - $ 4,411 $ 506 Distribution facility consolidation and technology upgrade costs - - 1, Activist Shareholder Response Costs 2,133 3, Shareholder Rights Plan costs Loss on debt extinguishment Non-cash share-based compensation 3,217 3,860 2, , Adjusted EBITDA $ 18,012 $ 22,773 $ 9,206 $ 3,424 $ 3,836 $ 2,529 $ 6,436 $ 16,225 $ 3,050 22

23 Cash Flow (In thousands) Year Ending Year Ending Year Ending Year Ending Year-to-Date February 1 January 31, January 30, January 28, April 29, OPERATING ACTIVITIES: Net loss $ (2,515) $ (1,378) $ (12,284) $ (8,745) $ (3,196) Adjustments to reconcile net loss to net cash provided by (used for) operating activities- Depreciation and amortization 12,585 8,872 10,327 11,209 2,604 Share-based payment compensation 3,217 3,860 2,275 1, Amortization of deferred revenue (85) (86) (85) (86) (21) Amortization of debt discount & deferred financing costs Loss on Debt extinguishment Deferred Income Taxes 1, Changes in operating assets and liabilities: Accounts receivable, net (9,026) (4,889) (2,674) 15,978 13,524 Inventories, net (14,007) (10,294) (4,384) (3,181) (5,457) Prepaid expenses and other (565) 423 (274) Accounts payable and accrued liabilities 21, (3,080) (11,606) (2,095) Net cash provided by (used for) operating activities 13,953 (1,315) (9,411) 7,284 6,843 INVESTING ACTIVITIES: Property and equipment additions, net or proceeds from sale of (8,247) (25,119) (22,014) (10,261) (3,867) Cash paid for acquisition (508) - Purchase of NBC trademark license (2,830) Purchase of EVINE trademark - (59) Change in restricted cash - - 1, Net cash used for investing activities (11,077) (25,178) (20,364) (10,769) (3,867) FINANCING ACTIVITIES: 4 Proceeds from issuance of term loans - 12,152 2,849 17,000 6,000 7 Proceeds from issuance of common stock and warrants , Proceeds from issuance of revolving loans - 2,700 19, Proceeds from exercise of stock options, net 227 2,794 2, Payments on term loans - (145) (2,076) (2,852) (10,263) 1 Payments for deferred financing costs (390) (307) (537) (1,512) (215) Payments for common stock issuance costs (786) (80) 2 Payments on capital lease (13) (50) (52) (39) - Payments for restricted stock issuance costs (46) (34) Payments for repurchases of common stock (5,055) Payments for debt extinguishment costs (199) Net cash provided by (used for) financing activities (176) 17,144 21,844 24,235 (9,685) Net increase (decrease) in cash 2,700 (9,349) (7,931) 20,750 (6,709) BEGINNING CASH 26,477 29,177 19,828 11,897 32,647 ENDING CASH 29,177 19,828 11,897 32,647 25,938 23

24 Key Operating Metrics F13 FY F14 FY F15 FY Q1 Q2 Q3 Q4 FY F17 Q1 Net Shipped Units (000s) 7,152 9,055 9,853 2,417 2,461 2,253 3,132 10,263 2,580 Average Selling Price $ 81 $ 67 $ 64 $ 62 $ 57 $ 60 $ 54 $ 57 $ 54 Return Rate % 22.3% 21.5% 19.8% 19.2% 19.8% 20.5% 18.4% 19.4% 18.8% Digital Sales % 45.2% 44.6% 46.9% 48.8% 47.9% 49.0% 51.9% 49.5% 50.6% Transaction Costs per Unit $ 2.48 $ 2.52 $ 2.84 $ 2.82 $ 2.63 $ 3.25 $ 2.61 $ 2.81 $ 2.68 Total Variable Costs % of Net Sales 8.0% 8.7% 9.2% 10.0% 9.6% 10.6% 9.4% 9.9% 9.6% Mobile % of Digital Sales 25.2% 33.5% 42.3% 45.6% 45.2% 45.9% 45.0% 45.4% 48.0% Interactive Voice Response % 25% 29% 27% 26% 25% 24% 21% 24% 24% Total Customers (000s)* 1,357 1,446 1, , Average Purchase Frequency - Items % of Net Merchandise Sales by Category Jewelry & Watches 43% 42% 39% 43% 41% 42% 38% 41% 41% Home & Consumer Electronics 35% 30% 31% 24% 21% 25% 31% 25% 22% Beauty 11% 12% 14% 15% 16% 14% 17% 16% 15% Fashion & Accessories 11% 16% 16% 18% 22% 19% 14% 18% 22% 100% 100% 100% 100% 100% 100% 100% 100% 100% *Customers can be active within one to four quarters per year and therefore quarterly active customer counts are not additive. 24